Debt Management Answers For You…

Does your credit card work for you or do you work for your credit card?

Most people’s answer to that question will depend on how they treat their “old plastic”, as credit cards are known. People who have gotten their fingers burned with credit cards will tell you they had no idea things had reached a point of disaster until it was too late!

Most credit card companies offers try sounding like they are in business to make your life easier. Well, they aren’t! Credit card companies have one purpose in life – to make money and they do it very well!

Now this is not a campaign against credit cards -they definitely have benefits. For instance in America if you want to rent a car, you need to have a (major) credit card.

But, consider this scenario: You receive an offer in your mail that sounds good, maybe it’s a new generation TV or a fridge. But it costs $2000. Oh, but you have a credit card with a $5000 limit, so you immediately make your purchase.

Here is how your repayment schedule might play out. Most credit cards charge a minimum percentage of the total balance per month – the amount varyies from card-to-card.

Assume the interest rate is 18 percent – in todays world that may be a low assumption – and you choose to repay only the minimum amount. By far the largest percentage of your payment will go towards interest and only a very small percentage towards the principle.

As a result, it may take years to repay the balance with you paying an exorbitant amount of interest for said purchase.

There is a moral here. Do you know how a porcupine makes love? Very, very, very carefully. Use your credit card(s) the same way.

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